HRA PCORI Fees for Dummies – Do I need to pay someone to prepare this for me?

The PCORI fee is a tax based on the average number of lives covered (ALC) by your HRA during the previous Plan Year, filed on IRS Form 720.

If your last HRA Plan Year ended between October 1, 2018 and October 1, 2019, and you have determined that you are required to pay the Patient-Centered Outcomes Research Institute (PCORI) fee that is due July 31, 2018.  – Read on.

You can pay someone else to prepare Form 720 for you, but it will most likely cost more to pay someone to prepare it than the amount of the fee you will pay. There is a vast amount of information and instructions available, but there is no need to feel overwhelmed, especially if you employ fewer than 10 employees.

The PCORI Fee is paid with the Quarterly Federal Excise Tax Return (IRS Form 720) for the second quarter of each year, due by July 31. If you do not normally file Form 720 and you are only doing so now to pay the PCORI fee, you will only file this form once each year.

Also see: PCORI fee due July 31 on some HRA/FSA plans

In order to complete form 720 you will need the following information:

1. Employer’s legal name
2. Employer’s FEID
3. Employer’s Address
4. Your HRA is considered an “applicable self-insured health plan”
5. You need to know the average number of lives covered by your HRA during the previous Plan Year.

The only information you might not have at your fingertips is “the average number of lives covered by your HRA during the previous Plan Year”.

You can use any of these three methods suggested by the IRS, also from the Form 720 Instructions:

1. The actual count method.

2. The snapshot method.

3. The state form method.

If you have very few employees, my recommendation is the snap-shot method. You pick several days in the previous Plan Year at your discretion (I suggest one date from each quarter). Look at how many participants were enrolled on each of those dates, add the number of participants, divide it by the number of days you looked at – there is your average.

If you are the only employee of a C Corporation and you know that you were the only employee covered by your HRA – you’re done. You pay about $2.50 and get on with your life.

If you would like to see the full IRS description of each method, see Internal Revenue Bulletin 2012-52.

Once you have determined the “the average number of lives covered by your HRA during the previous Plan Year” go to line 133 of Form 720, write this number in column (a) on the line for “Applicable self-insured health plans”, multiply this by $2.17 ($2.26 after 10-2016) and enter the total in the next column and in the “Tax” column. You then write this amount at the bottom of Part II where it says “Add all amounts in Part II”. Then write this same amount in box 3 at the top of Part III “Total tax. Add Part I, line 1 and Part II, line 2. Sign at the bottom, complete the payment voucher (720-V) at the very end of Form 720, and mail both with your check.

If you are already enrolled in EFTPS, you can pay electronically. If you are not already enrolled, go to https://www.eftps.gov/eftps/ for more information. Their website says that it takes 5-7 business days to receive your PIN

There is one bit of good news that might be worth mentioning here – A Memo released by the IRS on June 7, 2013 indicates that the PCORI fee is a deductible business expense. Not that exciting for those of you that just spent half an hour paying a little over $2.00 to the IRS. But you can rejoice in the fact that you are done and can move on with your life.

RELATED RESOURCES (PCORI Fees):

Form 720 Instructions:

https://www.irs.gov/pub/irs-pdf/i720.pdf

Form 720:

https://www.irs.gov/pub/irs-pdf/f720.pdf

PCORI Q&A at IRS.gov

https://www.irs.gov/uac/Patient-Centered-Outcomes-Research-Trust-Fund-Fee:-Questions-and-Answers

Internal Revenue Bulletin 2012-52

https://www.irs.gov/irb/2012-52_IRB/ar11.html

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